Budget 2023: 10 Things to look out for in this Upcoming Budget

All eyes will be on Finance Minister Nirmala Sitharaman as she prepares to give the last comprehensive Union Budget of the current term of the Narendra Modi-led National Democratic Alliance (NDA) administration.

Markets and people will have higher expectations of bold policies aimed at raising people’s income levels, allowing greater investment in infrastructure to create jobs, increasing farm incomes to keep the rural economy humming, and implementing favourable policies to attract more foreign and domestic investment.

Here are the 10 key things to watch out for:

Individual Income Tax

Individuals and the salaried class will also be paying close attention to what the budget announces about individual income tax brackets. This could be an opportunity to introduce a cleaner, simpler individual income tax slab and rate structure to replace the two-system arrangement in effect since 2020.

Capital Expenditure

Finance Minister Nirmala Sitharaman may reveal large expenditure plans to attract private investment. The government is expected to stick to its objective to increase capital expenditure in the upcoming Budget 2023-24, with a special emphasis on public spending on capital assets. This is consistent with the previous Budget, which saw a significant increase in the Centre’s capex commitments.

Road and other infrastructure developments can increase economic activity, construction, and job creation. The sector accounts for over 8% of GDP and is the largest direct and indirect job producer, employing approximately 40 million people.

Capital Gains Tax

Capital gains tax is charged on profits from the sale of both movable and immovable capital assets. The long-term or short-term capital gains tax is charged depending on how long an asset is held.

Food Subsidy Bill

Another figure that will be watched closely is the food subsidy bill. The government agreed in December to extend the free foodgrain scheme under the Pradhan Mantri Gareeb Kalyan Ann Yojana (PMGKAY) as Covid assistance by placing it under the National Food Security Act (NFSA) for 2023. From 2015-16 to 2019-20, the Centre’s annual food subsidy averaged Rs 1.1 lakh crore. As a result, while the bill for next year would be approximately double that amount, the government will not have to spend on PMGKAY, which costs nearly Rs 14,000 crore each month.

Fiscal Deficit

Markets and policymakers will be keeping a close eye on this statistic. Finance Minister Nirmala Sitharaman is likely to push on with fiscal consolidation, underscoring the government’s commitment to fiscal responsibility. As the epidemic lasted into 2022 and welfare spending grew, the fiscal deficit for 2021-22 remained significant at 6.9 percent of GDP. The government anticipates the deficit to fall to 6.4 percent of GDP and intends to continue fiscal reduction in order to achieve a fiscal deficit of less than 4.5 percent of GDP by 2025-26.

Nominal GDP Growth

How will the economy expand in 2023-24? The budget will provide clues. According to statistics ministry figures issued on January 6, India’s nominal GDP growth for FY23 is predicted to be 15.4 percent, down from 19.5 percent in FY22. In 2022-23, India’s real or inflation-adjusted GDP is expected to expand by 7%. The World Bank revised its GDP growth prediction for India in financial year 2022-23 to 6.9 percent, citing the economy’s increased resilience to global shocks.

Asset Monetisation

Budgetary allocations to infrastructure ministries could be related to how far they move and perform in the government’s planned national asset monetisation pipeline. (NMP). The government may fall short of the NMP objective for this year. So far this financial year, transactions of Rs 33,100 crore have been done under the NMP. Transactions of Rs 96,000 crore were executed under the NMP in the previous financial year, exceeding the target of Rs 88,000 crore.

Finance Minister Nirmala Sitharaman said in August 2021 that the government will monetise assets worth Rs 6,000 crore between 2021-22 and 2024-25 as part of the National Monetisation Pipeline (NMP) scheme. The government would retain ownership of the assets distributed through the National Monetisation Pipeline (NMP), which will be returned to the government after a period of time.

Section 80 (C)

Under the popular “Section 80C” scheme, the government might increase the tax advantages granted on money parked in a pool of savings instruments such as bank fixed deposits, insurance premiums, and mutual funds from Rs 150,000 to Rs 200,000 per year. If enacted, the idea could encourage people to put their excess income into banking and the financial system rather than stockpiling cash. Since 2014-15, the deduction limit under Section 80C has been Rs 1.5 lakh. In its first budget, published in July 2014-15, the NDA government increased the yearly investment limit under Section 80 (C) by Rs 50,000 to Rs 1.5 lakh.

Millets

As India prepares to guide the celebration of International Millet Year 2023 and encourage the cultivation and consumption of nutri-cereals, the Union Budget may offer a special fund or a scheme for millets. Millets are termed “Smart Food” since they are easy to grow, generally organic, and have a high nutritional value. The Indian government, led by Prime Minister Narendra Modi, sponsored the proposal for the International Year of Millets (IYM) 2023, which was approved by the United Nations General Assembly (UNGA). The statement has helped the government of India to be at the forefront of the IYM celebrations. Modi has advised to make IYM 2023 a ‘People’s Movement’ alongside presenting India as the ‘Global Hub for Millets’.